Johnson and Johnson to Acquire Swiss Biotech Firm for $30 Billion (JNJ)

After two months of talks, Johnson & Johnson announced early Thursday that it reached an agreement to pay $30 billion for Swiss drugmaker Actelion. French drugmaker Sanofi (SASY.PA) had also been interested, sources said, but was sidelined after J&J returned and began exclusive negotiations in December.Sanofi's failure to come away with a big deal for a second time has added to pressure on its management.Clozel said the J&J offer - putting Actelion's established drugs into its bigger commercial organization while leaving riskier early-stage R&D assets in the new 600-employee company for Clozel to develop - convinced him this was the right one."With this structure it was not hard", he told Reuters after a news conference.

J&J will initially hold 16 percent of the shares in R&D NewCo, with the right to acquire an additional 16 percent via a convertible note.

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The deal comes as J&J's autoimmune therapy drug Remicade, which generated $4.5 billion in USA sales in 2015 and is the company's top-selling drug, faces new competition from the US launch of Pfizer's copy drug, Inflectra. By using offshore cash to pay for the acquisition, J&J is also taking steps that might lower its future tax bills as Congress eyes an overhaul of the US tax code. The US behemoth expects the transaction to boost its long-term profit growth by as much as 2% over analysts' expectations. The transaction is expected to close by the end of the second quarter of this year. J&J ended Wednesday at $112.80 in NY, capping an 11.5% increase in the past year.

"The shares have risen 12.57% since it confirmed exclusive talks with J&J on December 21 but are more than 50% higher since takeover speculation first surfaced in late November", Martin Baccardax reports for TheStreet.

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"The deal structure fulfills Mr. Clozel's demand to keep control over early stage drug development, while giving J&J access to Actelion's lucrative treatments for rare diseases such as pulmonary arterial hypertension", writes Ralph Atkins for Financial Times.

Meanwhile, Sanofi is left empty- handed for the second time after losing out on cancer treatment manufacturer Medivation to another United States giant, Pfizer, in August.

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Shares in Swiss company Actelion surged 21% following the announcement. "R&D NewCo will be led by an experienced and proven scientific team", Jean Pierre Garnier, chairman of the board of R&D NewCo, said. Uptravi and Opsumit followed and are set to replace Tracleer, which has lost patent protection and faces challenges from copycat drugs. The CEO is a believer in Actelion's pipeline of experimental medicines, and he and his wife have resisted takeover bids through the years. Cravath, Swaine & Moore LLP, Homburger AG and Sexton Riley LLP are serving as legal advisors to J&J.


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